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In Fifty Days, Payments Innovation Will Stop In Silicon Valley

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Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#71

Post by dgallagher »

hristov wrote: post #16

In the interest of correctness I should point out that the half a million fee is not a fee but a bond. The state does not take it but it is kept in a trust for people that may be injured by the particular money transmission business that gets a license. Thus, if a money transmission business steals someone's money you can sue them and when you win you can take your money from the 500,000 bond so you are sure they wil…

Couldn't you buy insurance that covers the bond? Typically this is much less than a bonds face value.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#72

Post by lutorm »

pilif wrote: post #38

Here in Europe, PayPal (which is acting like a bank) had to get a banking license (like any other bank). As far as I know they didn't go bankrupt yet, so it can't be a wholly bad thing. If I drive a vehicle that acts like a car, I need a drivers license. If I run a service that acts like a bank I need a banking license. I really don't see a problem here.

I'm not saying the idea is totally pointless, but the $500k needed regardless of the scale of the business seems a bit excessive. Maybe there should be a sliding scale, so that if your transaction volume is $10k, you need a bond for $10k, etc, up to a ceiling? That would at least make it possible to start out testing whether it works without dumping a huge amount of cash.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#74

Post by ra »

hristov wrote: post #16

In the interest of correctness I should point out that the half a million fee is not a fee but a bond. The state does not take it but it is kept in a trust for people that may be injured by the particular money transmission business that gets a license. Thus, if a money transmission business steals someone's money you can sue them and when you win you can take your money from the 500,000 bond so you are sure they wil…

Thanks for clarifying.

I'd like to add that this is a good practice in the financial industry, and isn't a bad thing at all. It's consumer protection.

And, $500k is actually a pretty low figure for this type of 'bond'.

For example, in Australia I believe you would need a banking license (or a guarantor with a banking license) which requires a deposit of at least $40M in to an escrow account which is managed by the central bank.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#75

Post by urbanjunkie »

dpatru wrote: post #70
potatolicious wrote: post #51

Earlier quoted context omitted.

I wouldn't go as far as to say all regulation stifles innovation. A completely unregulated market may very well stifle innovation also - i.e., when consumer trust of that market is so low as to discourage economic activity. That is a rather extreme case, though. I think the more relevant point is that all regulations have overhead - even ones that don't charge a $500K bond. This is something governments sometimes see…

An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment. The difference between non-coercive (private) entities and government is that non-coercive entities adapt better. So, for example, if you'…

"An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment."

Do you have any examples from reality where this has happened? Are insurance companies and ratings agencies really trusted agencies that would function even better in an unregulated market?

I posit that with no regulation, these entities would become even more unscrupulous than they are now.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#76

Post by hammock »

urbanjunkie wrote: post #75
dpatru wrote: post #70

Earlier quoted context omitted.

An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment. The difference between non-coercive (private) entities and government is that non-coercive entities adapt better. So, for example, if you'…

"An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment." Do you have any examples from reality where this has happened? Are insurance companies and ratings agencies really trusted agencies that…

Why? The regulations erect great barriers to entry for would-be competitors, solidifying profits of the current market players and allowing them great latitude for slacking off and sub-par performance.

We're seeing the same thing now with the money transmitters.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#77

Post by Duff »

jrockway wrote: post #48

Doesn't all regulation stifle innovation? If I wanted to sell a homes in a skyscraper made of papier-mâché, building codes would prevent me from doing that. But that's not necessarily a bad thing: the first time someone leaves their soldering iron on while they're not using it, the building burns down and we have five hundred dead families on our hands. "Innovators" tend to think about the good aspects of their ideas…

This is true -- the hardcore capitalist would argue that the plaster industry has been hamstrung by the quaint requirements from building code to use wood, steel and concrete in construction.

There's a give an take here... the government has a perceived duty to protect the citizenry against bad actors, that that introduces a bias against sudden change aka "innovation". "Innovation" isn't always good -- just like to some people, certain "freedom fighters" are "insurgents".

On the other hand, there are entrenched business interests like Western Union (and payday lenders in "red" states) who use their influence to keep the status quo around, even if it hurts consumers. (ie. the poor and ignorant who spend $10 to send $100 to someone)

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#78

Post by 18pfsmt »

mattmanser wrote: post #43
tluyben2 wrote: post #39

Earlier quoted context omitted.

They are talking innovation; sure Paypal can get licenses like that, but a startup can't. Most (by far) startups don't have 500k to lock away. And most don't have the money to pay the license fees. So yes, it's an issue as far as innovation of payment services goes; now suddenly you NEED to get millions in investment and that all doesn't go into the product but instead into government crap.

And most startups don't go into banking. Seriously, if you're going into that kind of business you should have that kind of money behind you.

You realize Google Checkout is often lamented on HN because it doesn't operate in many European countries? It is exactly for these reasons.

Much like copyright laws are abused for business protection, so are regulations. Certainly within the US it would be better to have a federal license framework in order to minimize friction.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#79

Post by endian »

lutorm wrote: post #73
dublinclontarf wrote: post #26

And so we have one more reason to use Bitcoin.

... whose exchange rate against the dollar has gone up by a factor of 6 over the past weeks? If you had any debt nominated in Bitcoin, you'd be screwed.

...which is why you should define debts in terms of some weighted (USD, EUR, Gold, BTC, ...) currency basket and then pay in Bitcoin using its "exchange rate" at that time.

One option: a volume-adjusted average of MtGox.com trades over the last K hours

Another: use 0.001 of the amount to buy options to convert X Bitcoin into the agreed upon amount of (USD, ...). Market-making HFT bots will compete, making X the most fair amount.

All this complexity could be handled by user-friendly software...

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